Ibovespa Posts Weekly Rally as Vale Climbs After China Rate Cut

  • Iron-ore producer gains for the third consecutive day
  • Petrobras's advance fizzles as crude oil prices decline

The Ibovespa posted a weekly gain after China cut interest rates to bolster the economy of Brazil’s largest trading partner.

Vale SA, the world’s top producer of iron ore, climbed as much as 5 percent on Friday amid bets for stronger demand from the world’s No. 1 buyer of raw materials. Petrobras Brasileiro SA erased gains after crude slumped, dimming the outlook for its offshore investments.

Emerging-market stocks rallied after the People’s Bank of China said its one-year lending rate will drop to 4.35 percent from 4.6 percent effective Saturday to cushion a deepening economic slowdown. The nation’s sixth rate cut since November comes as the European Central Bank signals more policy easing, boosting wagers that more stimulus measures will lure traders to higher-yielding assets.

“Brazil is just being lucky to have such a positive scenario globally,” said Rogerio Freitas, a partner at Teorica Investimentos, which manages an equity hedge fund that beat 83 percent of its peers in the past year. “With higher-liquidity and lower interest rates around the world, there are very favorable winds for Brazilian assets.”

Stock Valuation

While the Ibovespa dropped 0.4 percent to 47,596.59 at the close of trading in Sao Paulo, it still climbed 0.8 percent this week. The gauge traded at 11 times estimated earnings, or 20 percent below the average of the MSCI EM Latin America Index. The real gained 0.3 percent to 3.8962 per dollar.

Earlier gains on Brazil’s benchmark stock index were bolstered by better-than-forecast earnings at car-rental company Localiza Rent a Car SA. Hypermarcas SA, a Brazilian maker of pharmaceuticals and cosmetics, rallied after Reuters reported the company may sell its diaper unit to Kimberly-Clark Corp.

Traders also watched the local economic and political scenario after President Dilma Rousseff’s Chief of Staff Jaques Wagner said the government will announce a new fiscal target for 2015. Brazil will miss its goal for this year and post the widest year-end budget deficit before interest payments on record, he said Thursday.

The recession at Latin America’s largest economy has crippled tax-collection efforts while dissent in Congress has frustrated government efforts to contain spending and raise levies. As a result, Fitch Ratings on Oct. 15 cut the nation to the cusp of junk, the fourth downgrade under Rousseff’s watch.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE